What is straight time pay?
Straight time pay is the standard wage an employee earns during a designated pay period (i.e. a standard workweek of 40 hours). It does not include overtime, bonuses, or benefits, such as paid time off (PTO).
It is calculated using your employee’s hourly rate of pay. For example, if they work 40 hours in a week and earn $20 per hour, the straight time pay would be $800 ($20 x 40).
Straight time pay is slightly different from regular time pay. Regular time sometimes includes additional compensation (such as PTO or sick leave), potentially resulting in a higher amount.
It’s also entirely removed from overtime, which is usually calculated as an increased hourly rate. For example, if the employee earning $20 per hour works five hours of overtime (i.e. 45 hours) in that week, they would receive straight time pay of $800 for the first 40 hours, and then overtime pay of $150 for the additional five hours (assuming the overtime is paid at 1.5x the hourly rate). Therefore, the employee's total pay for that week would be $950.
While the term is most commonly used in Canada and the US, similar concepts exist around the world. In the UK, for instance, the comparable term would be basic or standard pay, while in Australia and New Zealand, “ordinary hours” is commonly used.
Straight time pay in practice
As an employer, straight time pay is an important concept, allowing you to:
- Comply with labour laws
- Accurately calculate payroll
- Effectively manage budgets
- Pay your employees correctly for the hours they work
It’s also crucial for employees to understand their base earnings. Knowing this can help them calculate their base income, calculate any potential overtime, and plan their finances more effectively.